DEF 14A of Beacon Financial Corp
Filed Apr 5, 2024 · FY20230001108134-24-000006
Information Regarding Directors and Director Nominees
Information Regarding Directors and Director Nominees
2024 Nominees for Election to the Board of Directors
2024 Nominees for Election to the Board of Directors
2024 Nominees for Election to the Board of Directors
| DAVID M. BRUNELLE, CHAIRPERSON OF THE BOARD OF DIRECTORS OF BERKSHIRE HILLS BANCORP, INC., CO-FOUNDER AND MANAGING DIRECTOR OF NORTH POINTE WEALTH MANAGEMENT | | | | | Mr. Brunelle is Co-Founder and Managing Director of North Pointe Wealth Management in Worcester, Massachusetts. He has over 20 years of experience in financial services working with businesses, individuals, families and charitable foundations. Mr. Brunelle is a former Director of Commerce Bancshares Corp. and Commerce Bank & Trust Company and served on Commerce’s audit and loan committees. He has also served as trustee or corporator for numerous non-profit entities in and around Worcester, including The Nativity School of Worcester, The Worcester Regional Research Bureau, The Worcester Educational Development Foundation, the UMass/Memorial Foundation, Becker College and the Greater Worcester Community Foundation. | | | Independent | Board Committees: | | | Years of Service: 6 | | Compensation | | Age: 53 | | Corporate Governance/Nominating (Chair) | | | | Corporate Responsibility & Culture |
2024 Nominees for Election to the Board of Directors
| MARY ANNE CALLAHAN | | | | | Ms. Callahan has more than 35 years of investment banking expertise, most recently as a Managing Director in the Financial Services Group at Piper Sandler Companies where her responsibilities included advising bank management and boards of directors in the Northeast region on a broad range of strategic and financial topics. Previously she was a principal in Sandler O’Neill & Partners, L.P.’s investment banking group advising banks, thrifts and specialty finance companies and worked in the financial institutions group at Merrill Lynch and CIBC World Markets. | | | Independent | Board Committees: | | | Years of Service: <1 | | Compensation | | Age: 61 | | Risk Management, Capital & Compliance |
2024 Nominees for Election to the Board of Directors
| NINA A. CHARNLEY, FORMER SENIOR MANAGING DIRECTOR, TIAA | | | | | Ms. Charnley was Senior Managing Director, Enterprise Customer Experience Executive at TIAA. Ms. Charnley led the strategy, development and execution of a significant portfolio of technology projects launching the company's mobile app and a digital bank, building digital capabilities enabling employees and customers. Previously, she was an executive at Bank of America managing diverse businesses including a de novo sustainable energy lending program and created the strategy, infrastructure, template and accountabilities matrix for Bank of America's Diversity and Inclusion program. Ms. Charnley has been designated by the Board of Directors as a financial expert under the rules of the Securities and Exchange Commission | | | Independent | Board Committees: | | | Years of Service: 2 | | Audit | | Age: 68 | | Corporate Responsibility & Culture | | | | Risk Management, Capital, & Compliance |
2024 Nominees for Election to the Board of Directors
| MIHIR A. DESAI, PROFESSOR OF FINANCE, HARVARD BUSINESS SCHOOL & PROFESSOR OF LAW, HARVARD LAW SCHOOL | | | | | Dr. Desai is the Mizuho Financial Group Professor of Finance at Harvard Business School, and Professor of Law at Harvard Law School. Dr. Desai is an accomplished author and expert in finance and tax policy. He is a Research Associate in the National Bureau of Economic Research’s Public Economics and Corporate Finance Programs. In addition to his work at Harvard University, his professional experiences include CS First Boston, McKinsey & Co., and advising a number of firms and governmental organizations. | | | Independent | Board Committees: | | | Years of Service: 2 | | Compensation | | Age: 56 | | Risk Management, Capital & Compliance |
2024 Nominees for Election to the Board of Directors
| WILLIAM H. HUGHES III, PRESIDENT AND CEO OF EDUCATION DESIGN LAB | | | | | Mr. Hughes is President and CEO of Education Design Lab, a national nonprofit focused on expanding opportunity at the intersection of learning and work. He has been a leader, entrepreneur, innovator and board member in educational technology for the past two decades at companies such as Pearson, Cengage, Kaplan, EDC, FineTune Learning (acquired by Prometric) and Intellus Learning (acquired by Macmillan). In his earlier career, he held leadership positions in technology and venture development at Sapient and Cambridge Innovation Center. His more than 30 years of business experience spans strategy, product, services, business development, partnerships, AI and cybersecurity. | | | Independent | Board Committees: | | | Years of Service: 5 | | Corporate Governance/Nominating | | Age: 60 | | Corporate Responsibility & Culture |
2024 Nominees for Election to the Board of Directors
| JEFFREY W. KIP, CHIEF EXECUTIVE OFFICER OF ANGI INTERNATIONAL | | | | | Mr. Kip is Chief Executive Officer of Angi International which provides internet tools and resources for home improvement, maintenance, and repair projects. Angi International is a subsidiary of IAC/InterActive Corp (NASDAQ: IAC), which owns and manages popular online brands and services. Prior to his role as Chief Executive Officer, Mr. Kip was the Chief Financial Officer of IAC/InterActive Corp from 2012-2016. Mr. Kip's previous positions include Chief Financial Officer of Panera Bread, LLC from 2006 – 2012. Mr. Kip has been designated by the Board of Directors as a financial expert under the rules of the Securities and Exchange Commission | | | Independent | Board Committees: | | | Years of Service: 2 | | Audit | | Age: 55 | | Compensation (Chair) |
2024 Nominees for Election to the Board of Directors
| DR. SYLVIA MAXFIELD, DEAN OF THE PROVIDENCE COLLEGE SCHOOL OF BUSINESS | | | | | Dr. Maxfield is Dean of the Providence College School of Business and was previously Chair of the Faculty and MBA Program Director at Simmons University in Boston. Additionally, she serves as voting member of the Rhode Island State Investment Commission, which oversees fund performance, including asset allocation and investment-related contracting. Dr. Maxfield also votes on shareholder proxy activity on behalf of the State. Previously, she has served on the boards of the Greater Providence Chamber of Commerce, Social Enterprise Greenhouse and the 21st Century Fund. Dr. Maxfield has been designated by the Board of Directors as a financial expert under the rules of the Securities and Exchange Commission. | | | Independent | Board Committees: | | | Years of Service: 4 | | Audit (Chair) | | Age: 65 | | Corporate Governance/Nominating | | | | Risk Management, Capital & Compliance |
2024 Nominees for Election to the Board of Directors
| NITIN J. MHATRE, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR OF THE COMPANY | | | | Mr. Mhatre joined the Company as Chief Executive Officer and a Director in January 2021. He was previously Executive Vice President, Community Banking at Webster Bank, where he was a member of Webster Bank's executive team and led its Consumer and Business Banking groups and Webster Investment Services. Prior to joining Webster, he spent more than 13 years at Citigroup in various leadership roles across consumer-related businesses globally. Mr. Mhatre has served on the Board of the Consumer Bankers Association, headquartered in Washington D.C., since 2014 and was Chairman of the Board from 2019-20. He also serves on the Board of Cradles to Crayons Boston, based in Newton, Massachusetts. | | Non-Independent | | | Years of Service: 3 | | | Age: 53 | |
2024 Nominees for Election to the Board of Directors
| LAURIE NORTON MOFFATT, DIRECTOR & CEO OF THE NORMAN ROCKWELL MUSEUM | | | | | Ms. Norton Moffatt is the Director and Chief Executive Officer of the Norman Rockwell Museum, Stockbridge, Massachusetts. Since 1986, Ms. Norton Moffatt has overseen the expansion of the museum’s facilities and the creation of a scholars’ research program. Her efforts resulted in the Museum receiving the National Humanities Medal, America’s highest humanities honor. Ms. Norton Moffatt is also an active community leader. She is a founder of 1Berkshire and Berkshire Creative Economy Council and serves as a trustee of Berkshire Health Systems and a director of Berkshire Health Systems, Inc. and Berkshire Medical Center, Inc. | | | Independent | Board Committees: | | | Years of Service: 10 | | Corporate Governance/Nominating | | Age: 67 | | Corporate Responsibility & Culture (Chair) |
2024 Nominees for Election to the Board of Directors
| KARYN POLITO, FORMER LIEUTENANT GOVERNOR OF MASSACHUSETTS | | | | | Ms. Polito is currently Principal of Polito Development Corporation, a commercial real estate development firm. Ms. Polito was the 72nd Lieutenant Governor of the Commonwealth of Massachusetts from 2015 to 2023. In that position, she advocated for women’s empowerment and championed renewable energy, climate adaption, workforce development, affordable housing, and the innovation economy. She helped increase aid to local communities and spearheaded efforts to expand offshore wind and educational opportunities for careers in science, technology, engineering and math for women and students. Prior to serving as Lieutenant Governor, Ms. Polito was a member of the Massachusetts House of Representatives and a Partner at Milton, Laurence & Dixon, LLP. | | | Independent | Board Committees: | | | Years of Service: 1 | | Corporate Responsibility & Culture | | Age: 57 | | Risk Management, Capital & Compliance |
2024 Nominees for Election to the Board of Directors
| ERIC S. ROSENGREN, FORMER PRESIDENT AND CEO OF THE FEDERAL RESERVE BANK OF BOSTON | | | | | Mr. Rosengren is CEO of Rosengren Consulting and Visiting Scholar at the MIT Golub Center for Finance and Policy. He previously served as President and CEO of the Federal Reserve Bank of Boston from 2007 to his retirement in 2021. As a Federal Reserve Bank president, he was a participant and voting member of the Federal Open Market Committee. He also led projects to help rebuild smaller city economies and provide opportunities for diverse populations to prosper. Mr. Rosengren joined the Boston Fed in 1985 and held various roles in the Bank’s Research and Supervision, Regulation, and Credit Departments. He has published numerous papers and articles, and is often cited in leading academic journals and is featured in major media on topics including macroeconomics, monetary policy, international banking, bank supervision, and risk management. Mr. Rosengren has been designated by the Board of Directors as a financial expert under SEC rules. | | | Independent | Board Committees: | | | Years of Service: 1 | | Audit | | Age: 66 | | Risk Management, Capital & Compliance (Chair) |
Information About Director Nominees
Information About Director Nominees •73% of our director nominees are female and/or racially or ethnically diverse. •40% of our Board committees are chaired by diverse directors.
Corporate Governance
Corporate Governance The Company is committed to strong corporate governance policies, practices, and procedures designed to make the Board more effective in exercising its oversight role. The following sections provide an overview of our corporate governance structure, including independence and other criteria we use in selecting director nominees, our Board leadership structure, and the responsibilities of the Board and each of its Committees. Our Corporate Governance Policy, among other key governance materials, helps guide our Board and management in the performance of their duties and is regularly reviewed by the Board.
Corporate Governance
| Key Corporate Governance Documents | | | Please visit our investor relations website at ir.berkshirebank.com to view the following documents: | | | | Corporate Governance Policy | | | Code of Business Conduct | | | Anonymous (Whistleblower) Reporting Line Policy | | | Board Committee Charters | | | Certificate of Incorporation | | | Company By-Laws | | These documents are available free of charge on our website or by writing to Berkshire Hills Bancorp, c/o Wm. Gordon Prescott, Senior Executive Vice President, General Counsel and Corporate Secretary, 60 State Street, Boston, Massachusetts 02109. | |
Corporate Governance
The Board and management regularly review best practices in corporate governance and are committed to a program that serves the long-term interests of our shareholders. We believe good governance strengthens accountability and promotes responsible corporate citizenship. Several of our current best practices are highlighted below:
Corporate Governance
| Independent Oversight | Shareholder Orientation and Accountability | Good Governance | | Majority independent directors(1) | Declassified Board with all directors standing for election each year | Diverse board membership (skills, tenure, age); annual director education; active board replenishment program | | Strong and engaged independent Board Chair | Robust stock-ownership guidelines | Annual evaluation of CEO and senior management and review of succession plans | | All key committees are fully independent and led by the Board chair | Annual shareholder engagement program | Implementation of a Corporate Responsibility & Culture Committee at both Board and employee level | | Regular executive sessions of independent directors | Plurality voting standard for director elections, with director resignation policy in effect for uncontested elections | Risk oversight by full board and committees | | Board Chair or Chair of Corporate Governance can call special meeting of the Board at any time for any reason | No poison pill in place; annual election of all directors | Formal ethics code, reporting hotline and ethics training to all employees |
Corporate Governance
(1) 10 out of 11 of the director nominees will be designated as independent directors; CEO/Director Mhatre is not independent.
Board of Directors
Board of Directors The primary functions of Berkshire’s Board of Directors are: •To oversee management performance on behalf of shareholders; •To ensure that the interests of the shareholders are being served; •To monitor adherence to Berkshire’s standards and policies; •To promote the exercise of responsible corporate citizenship; and •To perform the duties and responsibilities assigned to the Board by the laws of Delaware, Berkshire’s state of incorporation. Customarily, the Board elects its members to serve in identical capacities on the Board of Directors of Berkshire Bank, the Company's main operating subsidiary which is chartered in the Commonwealth of Massachusetts.
Board Structure and Meetings
Board Structure and Meetings
Board Structure and Meetings
| Director Name, Age & Primary Occupation | Director Since | Director Category | Audit(1) | Comp | Corp Gov & Nom | Corp Responsibility & Culture | Risk Management, Capital & Compliance | | Baye Adofo-Wilson (2), Age 55 CEO of BAW Development, LLC | 2019 | I | O | O | | O | | | David M. Brunelle, Age 53 Chairperson of the Board of Directors of Berkshire Hills Bancorp, Inc. Co-Founder and Managing Director of North Pointe Wealth Management | 2017 | I | | O | C | O | | | Mary Anne Callahan (2), Age 61 Former Managing Director in the Financial Services Group at Piper Sandler Companies | 2023 | I | | O | | | O | | Nina A. Charnley, Age 68 Former Senior Managing Director TIAA | 2021 | I | O | | | O | O | | Mihir A. Desai, Age 56 Professor of Finance and Law | 2022 | I | | O | | | O | | William H. Hughes III, Age 60 President of Education Design Lab | 2019 | I | | | O | O | | | Jeffrey W. Kip(1), Age 55 Chief Executive Officer Angi International | 2021 | I | O | C | | | | | Sylvia Maxfield(1), Age 65 Dean Providence College School of Business | 2020 | I | C | | O | | O | | Nitin J. Mhatre, Age 53 President and CEO of Berkshire Hills Bancorp, Inc. | 2021 | N | | | | | | | Laurie Norton Moffatt, Age 67 Director & CEO of the Norman Rockwell Museum | 2013 | I | | | O | C | | | Karyn Polito, Age 57 Former Lieutenant Governor of Massachusetts | 2023 | I | | | | O | O | | Eric S. Rosengren(1), Age 66 Former President and CEO of the Federal Reserve Bank of Boston | 2023 | I | O | | | | C | | Michael A. Zaitzeff(2), Age 41 Co-founder and managing member of VM GP II LLC | 2021 | I | | O | | | O | | Number of Meetings in 2023 | 11 (Full Board) | | 13 | 4 | 6 | 4 | 6 | | N = Non-Independent Director | I = Independent Director | | | C = Chair | | O = Committee Member | |
Board Structure and Meetings
(1) Directors Charnley, Kip, Maxfield, and Rosengren have been designated by the Board as Financial Experts. (2) Directors Adofo-Wilson and Zaitzeff are not standing for re-election. Director Callahan was appointed to the Board in 2023 and is now standing for election.
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
Director Compensation
Director Compensation The Company uses a combination of cash and restricted stock to attract and retain qualified candidates to serve on the Board. Restricted stock grants are intended to align directors’ interests with those of the Company’s shareholders. The Compensation and Corporate Governance/Nominating Committees review director compensation and benefits annually and make recommendations to the Board. The following table provides the compensation received by individuals who served as directors of the Company during the 2023 fiscal year. Mr. Mhatre does not receive separate compensation for his service on the Board.
Director Compensation
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(1)(2) | Option Awards ($) | All Other Compensation ($)(3) | Total ($) | | Baye Adofo-Wilson | 60,000 | 65,000 | — | 3,281 | 128,281 | | David M. Brunelle(4) | 125,000 | 65,000 | — | 3,412 | 193,412 | | Mary Anne Callahan | 16,877 | 19,500 | — | — | 36,377 | | Nina A. Charnley | 68,000 | 65,000 | — | 1,446 | 134,446 | | John B. Davies(5) | 31,000 | 65,000 | — | 3,281 | 99,281 | | Mihir A. Desai | 56,000 | 65,000 | — | 633 | 121,633 | | William H. Hughes III | 56,000 | 65,000 | — | 3,281 | 124,281 | | Jeffrey W. Kip | 63,000 | 65,000 | — | 469 | 128,469 | | Sylvia Maxfield | 81,000 | 65,000 | — | 2,862 | 148,862 | | Laurie Norton Moffatt | 62,000 | 65,000 | — | 3,281 | 130,281 | | Karyn Polito | 50,707 | 59,150 | — | — | 109,857 | | Eric S. Rosengren | 48,195 | 48,239 | — | — | 96,434 | | Jonathan I. Shulman(5) | 33,000 | 65,000 | — | 2,862 | 100,862 | | Michael A. Zaitzeff | 60,000 | 65,000 | — | 1,645 | 126,645 |
Director Compensation
(1) On December 10, 2020, the Board of Directors, acting at the recommendation of the Compensation Committee, adopted a New Director Compensation Program, pursuant to which the Board has the discretion to award newly elected or appointed directors pro rata cash fees and equity compensation as of the date they begin their service on the Board. As a result of this program, the following directors received additional cash fees and stock awards in either July 2023 or January 2024 that are reported in this table: a. Following her appointment to the Board for the first time on September 13, 2023, Ms. Callahan was paid a pro rata amount of cash fees in the amount of $16,877 on January 15, 2024, for the period from September 13 to December 31, 2023, and awarded 779 shares of Company stock on January 30, 2024, at a value of $19,500, for the period from September 13 to December 31, 2023, which shares all vested on January 30, 2024. b. Following her appointment to the Board for the first time on February 3, 2023, Ms. Polito was paid a pro rata amount of cash fees in the amount of $22,707 on July 15, 2023, for the period from February 3 to June 30, 2023, and awarded 2,854 shares of Company stock on July 1, 2023, at a value of $59,150, for the period from February 3 to December 31, 2023, which shares all vested on January 30, 2024. c. Following his appointment to the Board for the first time on April 5, 2023, Mr. Rosengren was paid a pro rata amount of cash fees in the amount of $15,195 on July 15, 2023, for the period from April 5 to June 30, 2023, and awarded 2,327 shares of Company stock on July 1, 2023, at a value of $48,239, for the period from April 5 to December 31, 2023, which shares all vested on January 30, 2024. (2) Represents the grant date fair value of the restricted stock awards. Since January 30, 2004, no stock options have been granted to any directors. Directors serving as of December 31, 2023 had the following number of unvested shares of restricted stock and stock options outstanding as of that date:
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
| Name | Unvested Restricted Stock | Stock Options Outstanding | | Baye Adofo-Wilson | 3,147 | — | | David M. Brunelle | 3,147 | — | | Mary Anne Callahan | — | — | | Nina A. Charnley | 2,534 | — | | Mihir A. Desai | 2,099 | — | | William H. Hughes III | 3,147 | — | | Jeffrey W. Kip | 2,578 | — | | Sylvia Maxfield | 3,147 | — | | Laurie Norton Moffatt | 3,147 | — | | Karyn Polito | 2,854 | — | | Eric S. Rosengren | 2,327 | — | | Michael A. Zaitzeff | 2,665 | — |
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
(3) Reflects dividends paid when restricted stock becomes vested. (4) Includes $130.50 in imputed income on split dollar insurance recognized by Mr. Brunelle. (5) Messrs. Davies and Shulman retired from the Company and the Bank Boards of Directors, effective as of the 2023 Annual Meeting on May 18, 2023. Retainers for Non-Employee Directors. The following table sets forth the applicable retainers that will be paid to our non-employee directors for their service on our Board of Directors during 2024.
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
| Annual Cash Retainer for Board Service | $40,000 | | Annual Cash Retainer for Board Chair | $95,000 | | Annual Cash Retainer for Board Vice Chair(1) | $65,000 | | Annual Equity Retainer for Board Service(2) | $65,500 | | Annual Cash Retainer for Audit Committee Chair | $13,000 | | Annual Cash Retainer for all other Committee Chairs | $6,000 | | Annual Cash Retainer for Attendance at Audit Committee Meetings | $12,000 | | Annual Cash Retainer for Attendance at all other Committee Meetings | $8,000 |
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
(1) This role is not filled at this time. (2) Restricted equity grants awarded to non-employee directors vest in full after one year.
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
| Proposal 2: Advisory Vote on Executive Compensation | |
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
Background. In accordance with Section 14A of the Securities Exchange Act of 1934, shareholders are being given the opportunity to vote on an advisory (non-binding) resolution at the Annual Meeting to approve our executive compensation as described below in the Compensation Discussion and Analysis, compensation tables and narrative discussion of NEO compensation presented in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse the Company’s executive pay program. The purpose of our compensation policies and procedures is to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and enhancement of shareholder value. The Board of Directors believes the Company’s compensation policies and procedures achieve this objective, and therefore recommend shareholders vote “FOR” the proposal. “Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this proxy statement pursuant to Item 402 of Securities and Exchange Commission Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” Is the Shareholder Vote Binding on the Company? This is an advisory vote only, and neither the Company nor the Board of Directors will be bound to take action based upon the outcome. The Compensation Committee will consider the vote of the shareholders when considering future executive compensation arrangements. THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THIS PROPOSAL.
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
| Compensation Discussion and Analysis | |
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
In this section we explain our compensation philosophy, describe the material components of our executive compensation program, and review the 2023 compensation for our Named Executive Officers (“NEOs”) listed below. Their compensation is set forth in the Summary Compensation Table and other compensation tables contained in this Proxy Statement, which should be reviewed in conjunction with this discussion and analysis.
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
| Named Executive Officers(1) | | | Nitin J. Mhatre | President, Chief Executive Officer, and Director | | R. David Rosato | Senior Executive Vice President, Chief Financial Officer | | Sean A. Gray | Senior Executive Vice President, Chief Operating Officer | | James Brown | Senior Executive Vice President, Head of Commercial Banking | | Gregory D. Lindenmuth | Senior Executive Vice President, Chief Risk Officer | | Brett Brbovic | Senior Managing Director, Former Interim Chief Financial Officer |
PROPOSAL 1: ELECTION OF DIRECTORS | DIRECTOR COMPENSATION
(1) On February 6, 2023, David Rosato joined the Company as SEVP/CFO and Mr. Brbovic returned to his duties as Chief Accounting Officer. James Brown joined the Company on January 18, 2023. Overview. The compensation program is designed so that overall pay levels reflect performance over the short-term and long-term. Performance metrics are chosen to align with our strategic priorities and drive shareholder value. The Compensation Committee (“the Committee”) considers market data and advice from its independent compensation consultant, Meridian Compensation Partners, LLC ("Meridian") when making its decisions.
2023 Performance Summary
Note: The Company’s financial incentive metrics are non-GAAP operating measures which are reconciled to GAAP measures in Appendix A. For comparison purposes, the operating ROTCE measure includes unrealized losses on AFS securities. Peer operating PPNR is estimated. Peer data source - S&P Global Market Intelligence. Peer group is the compensation peer group discussed below.
Highlights of our Compensation and Governance Programs
| WHAT WE DON'T DO | | Gross-ups for Excise Taxes: We have not provided change-in-control tax gross-up clauses since 2009, nor do we intend to include this feature in future contracts. At this time, one legacy NEO change in control agreement remains in place; the potential impact of this contract clause is not material. | | Hedging and Pledging: All of our officers with the title of vice president or higher, non-employee directors, and all persons in the accounting, executive, finance and legal departments are prohibited from engaging in hedging, monetization, derivative or similar transactions with Company securities. We also have a policy that discourages pledging of company securities, with very limited exceptions. | | Employment Contracts: Our executives, with the exception of the CEO, are all employed “at will” and the relationship may be terminated by the Company or the employee at any time without any severance payments. The CEO is employed under a three-year contract. Documented change-in-control arrangements align management and shareholder interests. | | Dividends on Unvested Equity Awards: We do not pay dividends on any restricted stock compensation until vested. |
Executive Compensation Key Principles
Executive Compensation Key Principles Our philosophy is to provide an executive compensation program that rewards long-term value for our shareholders and promotes sound risk management. The key principles that support our philosophy are: ✓ Attract and retain highly talented executives committed to our success ✓ Pay for performance ✓ Align executive interests with those of our shareholders ✓ Manage risk through oversight and compensation design features and practices Important features of our program are: ✓ A significant portion of direct pay is at-risk and performance-based ✓ A meaningful portion of pay is in the form of Company stock to align our executives with shareholder interests ✓ Sixty percent (60%) of the NEOs’ long-term incentive value is granted in the form of performance-based restricted stock (performance shares), which vests at the end of a three-year period based on financial performance. The remaining 40% of NEO’s long-term incentive value is granted in restricted stock vesting on a pro-rata basis over three years. The time-based portion of the award is meant to support executive retention and support meaningful stock ownership by our NEOs. The information below illustrates our 2023 target direct compensation for the three NEOs who served the full year in their positions and illustrates that at-risk and equity compensation is slightly higher than the average of our peer group.
Key Principles That Support Our Philosophy
| Attract and retain highly talented executives committed to our success | ● | Provide competitive total compensation that enables us to attract and retain highly talented executives with experience and leadership abilities to grow and sustain our business | | | ● | Target total compensation opportunities to reflect the median of market; defined as banks similar in size and business model to Berkshire | | Pay for performance alignment | ● | Measure our success through a balanced portfolio of performance metrics that rewards corporate and individual success | | | ● | A significant portion of total compensation is “at-risk” and based on short and long-term performance | | | ● | Financial performance results fund our annual incentive plan and determine a portion of long-term equity vesting | | | ● | Long-term equity compensation was granted with 60% of the grant tied to 3-year performance and 40% time-based with vesting over 3 years | | Align executive interests with those of our shareholders | ● | Performance goals are directly aligned with our strategic and operating objectives targeted towards long-term shareholder value | | | ● | Rigorous stock ownership requirements to ensure our executives hold stock throughout their tenure as executives | | | ● | A significant portion of executive compensation, consisting of our long-term incentive, is in the form of Company shares | | Manage risk through oversight and compensation design features and practices | ● | Total compensation program incorporates a balanced approach that includes pay that is fixed and variable, short- and long-term, and in the form of both cash and equity | | | ● | Multiple goals in our incentive plans to reinforce financial, operational, risk, and shareholder considerations | | | ● | Committee can apply discretion to negatively adjust incentive compensation in consideration of risk management objectives | | | ● | Balance of short-term and long-term incentives, cash and equity, annual and multi-year performance periods, with 3-year performance in the long-term plan | | | ● | Incentive plan caps for maximum payments | | | ● | Clawback policy that allows for recoupment of compensation for financial restatement | | Compensation Drivers | ● | Incentive plans designed to encourage achievement of our strategic business goals and reinforce our business values and support growth in shareholder value | | | ● | Pay levels that are fair, competitive, and internally equitable | | | ● | A focus on the attainment of our vision, business strategy, operating imperatives, and results | | | ● | Recognition of Company and individual performance | | | ● | Consideration of market and best practices |
Benchmarking Analysis - Compensation Peer Group
Benchmarking Analysis - Compensation Peer Group The Committee considers the structure of compensation programs and pay levels at other publicly traded banks similar in size and business model to Berkshire when evaluating our compensation program. The Committee’s independent compensation consultant conducts a comprehensive competitive market analysis annually using the peer group and other industry survey data to provide reference for the Committee in setting pay and making pay decisions. 2023 Peer Group: In July 2022 the consultant updated the peer group to be used in the fall of 2022 to benchmark executive pay in preparation for setting 2023 pay levels. As in the past, the criteria reflected exchange traded banks in the Northeast of similar size (i.e. approximately 0.5x to 2x Berkshire's size). Banks involved with mergers, banks with different business models, and smaller banks were excluded. The result was a peer group of 18 banks with a median asset size of $12.1 billion, positioning Berkshire at the 50th percentile based on asset size. The peer group is listed below:
Benchmarking Analysis - Compensation Peer Group
| Brookline Bancorp | Independent Bancorp, Inc. | | Community Bank System | Lakeland Bancorp, Inc. | | Connect One | NBT Bancorp Inc. | | Customers Bancorp, Inc. | OceanFirst Financial Corp. | | Dime Community | Provident Financial Services | | Eagle Bancorp, Inc. | S&T Bancorp | | Eastern Bankshares | Sandy Spring Bancorp Inc. | | First Commonwealth Financial | Tompkins Financial Corporation | | Flushing Financial Corporation | WSFS Financial Corporation |
Short-Term Incentive Program (STI)
Short-Term Incentive Program (STI)
Short-Term Incentive Program (STI)
| The Company’s short-term incentive compensation program is designed to compensate executives for executing the Company’s strategic plan and achieving critical annual performance goals. The STI program provides meaningful “pay-at-risk” that is earned each year based on performance results. It also seeks to motivate and reward achievement of specific Company, business unit and individual performance goals with competitive compensation when performance goals are achieved; above or below median pay when performance results are above or below goals. |
Short-Term Incentive Program (STI)
2023 Short-Term Incentive Summary: Target incentive opportunities are set as a percentage of base salaries. Target incentive opportunities were unchanged from the prior year for the Chief Executive Officer and Chief Operating Officer positions and were increased for the other NEO positions. Performance metrics and goals were established at the beginning of the year. In the second quarter of 2023, the Committee determined that the macroeconomic environment and related bank failures had a profound effect on the banking industry - beyond the scope of the planning assumptions originally used to develop the Company’s forecasts and budgets. The Committee thoroughly discussed the following: 1) whether management reasonably should have been able to forecast the current environment; 2) the impact of non-achievable goals on potential business performance; and 3) alternatives to ensure that the management team remained focused on financial performance and shareholder value throughout 2023. The Committee determined that it was not in the best interests of shareholders to have what was perceived as non-achievable goals for the remainder of 2023 that were for the most part outside of the NEOs' span of control. The Committee also recognized management's leadership in positioning the Company favorably in response to the challenges facing the industry. Therefore, the Committee used the following approach to the short-term incentive program for 2023: •Performance for January 1 through June 30, 2023 was measured using the goals established at the beginning of the year. Overall performance was achieved at 78.2% of target. •Performance for July 1 through December 31, 2023 was measured using goals that reflected the interest rate environment and the impact of bank failures on certain elements of business performance such as deposits. Overall performance was achieved at 108.5% of target. •The performance outcomes were averaged, resulting in 93.3% goal achievement for the year. If average performance on the Corporate Scorecard had been over target, the Committee would have capped the STI funding pool to 100% of target. The Committee considers these actions appropriate given the bank failures and industry funding challenges in 2023. It does not anticipate using this approach in the normal course of its compensation design or ongoing decision making. Overview of Process. Participation in the Company’s executive STI program includes a group of executives, including the NEOs. The Committee sets and approves incentive award target payments for each participant (defined as a percentage of salary) at the start of each year, based on competitive market data. An incentive pool is established based on the total of the target payments of plan participants. The actual STI pool funding is primarily determined based on a formulaic calculation of Company performance against defined quantitative financial measures, without discretion (“the Corporate Scorecard”). The same five measures were used in 2023 and 2022. The Committee sets threshold, target, and stretch goals for each financial measure based on the business plan and Board approved budget. Target performance goals (reflective of our budget) are expected to have some stretch and not be “guaranteed”. Threshold performance goals and awards are intended to reward solid performance but at reduced payout levels. Stretch performance is expected to represent strong performance that is unlikely, but possible, if we exceed our goals. Thresholds are generally set at 80% of target and stretch goals are generally set at 120% of target. Each performance measure (see tables below) is equally weighted (i.e. 20% for each of the five performance measures) The incentive pool funding at year-end is based on actual corporate performance against the performance targets, with the total pool funding ranging from 0% - 150% of the payment target. The weighted measures are referred to as the Corporate Scorecard. Performance below threshold receives no compensation. Performance at threshold receives 50% of targeted compensation. Performance at stretch receives 150% of target, which is the maximum for each performance goal. Performance between threshold and stretch is compensated proportionately to the variance from target. The Committee approves the Corporate Scorecard as well as the President and Chief Executive Officer’s individual goals. Goals are developed for the other NEOs to support the Corporate Scorecard. Once the Corporate Scorecard results and pool funding are known, individual performance is assessed to determine and allocate the actual awards from the amount that has been funded to the incentive pool. The Committee determines individual awards in consideration of the executive's performance. The Committee may use discretion to consider other factors including Company performance shortfalls; regulatory and safety and soundness concerns; and risk management considerations. The maximum award for any participant, in consideration of Corporate and Individual performance, is capped at 150% of that participant’s payment target. The total awards for all participants do not exceed the total incentive pool. Given the changes to the incentive program for 2023, the Committee decided that the overall STI funding pool would be capped at 100% of target-level performance. Target Incentive Opportunities. The table below illustrates the annual incentive target payment amounts, expressed as a percentage of salary.
Short-Term Incentive Program (STI)
| | 2022 | 2023 | | Role | Target % of Salary | Target % of Salary | | President and Chief Executive Officer | 75% | 75% | | Chief Operating Officer | 60% | 60% | | Chief Financial Officer | 45% | 55% | | Head of Commercial Banking | 45% | 55% | | Chief Risk Officer | 30% | 45% |
Short-Term Incentive Program (STI)
Note: The former Interim CFO was not a participant in the executive incentive program. His incentive compensation was based on his ongoing responsibilities as Chief Accounting Officer.
Company Goals and Funding of the Incentive Pool
Company Goals and Funding of the Incentive Pool The Committee establishes performance goals for the Corporate Scorecard that determine the pool available for payout of incentive compensation. In 2023, as in prior years, the Committee established plan goals near the start of the year based on its 2023 performance expectations, which generally targeted improvements over year-end 2022 run rate levels. During the first quarter, a number of large bank failures led to concerns about the stability of banking industry deposits, and the Federal Reserve Bank created an emergency funding facility to support the industry. In this environment, funding costs increased in the industry, leading to lower profitability through the rest of the year. As a result, the Committee established new goals for the second half of 2023, reflecting lowered expectations for financial performance and providing an incentive for initiatives to mitigate the earnings impact of industry conditions. During the first half of 2023, the Company's financial performance was generally in the midrange between threshold and target for the four financial measures in the STI scorecard. The banking industry crisis described earlier began to affect funding costs and margins in March, with continuing impact through the rest of the year. Based on the scorecard achievement, a pool funding rate of 78.2% was achieved for the first half of the year. Significant management actions included: •Increased collateral pledging and lengthening of funding maturities to further enhance liquidity. •Maintained momentum of diversified loan growth. •Talent recruitment taking advantage of opportunities resulting from bank failures, as well as ongoing impacts of bank mergers. •Early in 2023, the Company also completed the recruitment of a new Chief Financial Officer and Head of Commercial Banking, which were two NEO positions which were vacant at the start of the year. These new hires brought considerable talent and expertise and integrated well with the existing team. During the second half of 2023, the Company's financial performance was at or above target based on the revised goals for the financial measures in the scorecard. Based on the scorecard achievement, a pool funding rate of 108.5% was achieved for the second half of the year. Significant management actions included: •Through careful pricing disciplines, the pace of margin erosion declined in the second half of the year. •Loan growth was continued, albeit at a reduced rate. •Focused risk management resulted in problem asset resolutions and increased recoveries, with the net charge-off rate declining to a five-quarter low in the fourth quarter. •Procurement and expense management procedures were intensified. •Management pursued a number of initiatives to help mitigate earnings pressures, including: ◦Consolidating four branches ◦Disposing of excess back-office premises ◦Establishing a plan for a company-wide workforce realignment implemented after year-end ◦Executing a securities sale near year-end with proceeds used to reduce higher costing borrowed funds, benefiting future net interest income. The pool funding rates for the two halves of the year were equally weighted, with the result being that the pool funding rate for the full year 2023 was 93.3%. In addition to the financial metrics discussed above the pool funding included ESG programs, which were qualitatively evaluated as meeting target in both halves of the year. ESG performance was demonstrated in several ways at the bank: •Maintained Berkshire's ranking based on its ESG index in the top quartile in all quarters. •Improved human capital performance, declining employee turnover, and record high employee engagement. •Allocated amounts equivalent to the full $100 million sustainability bond to create affordable/workforce housing and enable green building development. •Achieved 100% on-premise renewable electricity goal and implemented Climate Risk Management Program. •Exceeded targets for low-moderate income, minority, and green lending The plan goals and results for the first and second halves of 2023 are shown below. Note: The measures identified as Operating are non-GAAP financial measures. They exclude items not viewed as related to ongoing operations. Their use, definitions, and reconciliations to GAAP measures are discussed more fully in the Form 10-K. For a summary of the reconciliation of these non-GAAP performance measures, please see Appendix A. ESG represents Environmental, Social, and Governance programs. The pool funding rates for the two halves of the year were equally weighted, with the result that the pool funding rate for the full year 2023 was 93.34%. Together with assessing financial performance results, the Committee also considered any risk, regulatory or shareholder issues and determined that there was no basis for adjusting the pool funding downward in 2023. Individual Payout Considerations. Once the pool funding was determined, the Committee evaluated individual payouts for each of the NEOs. As it did in recent years, the Committee decided to provide all NEO awards at the 93% STI pool funding rate. The Committee recognized: •Mr. Mhatre's executive recruitment and executive and management leadership through the challenges of the year while maintaining focus on the Company's strategic transformation initiatives. •Mr. Gray's oversight of branch and premises consolidation and implementation of new digital/mobile technology supporting improved customer and employee engagement. •Mr. Rosato's introduction of enhanced expense management and product pricing disciplines, strengthening of financial planning, and oversight of liquidity and balance sheet management strategies. •Mr. Brown's oversight of ongoing balanced loan growth, opportunistic recruitment of seasoned frontline deposit focused talent, and integration of private banking with the overall commercial team. •Mr. Lindenmuth's oversight of credit management, strong asset quality management, and solid compliance and regulatory relations management.
Long-term Incentive Plan (LTI)
Long-term Incentive Plan (LTI)
Long-term Incentive Plan (LTI)
| The Company’s long-term incentive/equity compensation program is designed to align senior executives with long-term interests of the Company and shareholders through stock-based compensation. The program also seeks to provide rewards for targeted multi-year performance, encourage stock ownership, and enhance our ability to retain our top performers. |
Long-term Incentive Plan (LTI)
2023 Long-Term Incentive Summary. As in recent years, the 2023 long-term incentive program was comprised of 60% performance shares that cliff-vest after three years based on pre-defined goals, and 40% time-based restricted shares which vest over three years, with 1/3 vesting at each grant date anniversary. Target opportunities were mostly unchanged as a percentage of base salary. Actual grant amounts were near target opportunities. Performance goals were unchanged from the prior year. LTI Program Overview. Each year in the first quarter the Committee determines the terms of the long-term incentive program, including participants, target opportunities for each role (defined as % of base salary), and the form and amount of compensation granted. These determinations included input and consideration of peer market data and practices as well as recommendations provided by the compensation consultant. Long-term incentive compensation is intended to: •Provide a meaningful portion of total compensation in stock-based awards •Align executives with our shareholders •Reward long-term performance and avoid excessive risk taking •Encourage retention of our key senior executives •Balance compensation rewards with risk through long-term vesting tied to performance The Committee also considered incentives provided by different award types, shareholder returns, avoiding excessive risk-taking and encouraging and maximizing employee retention. As in recent years, the Committee decided that performance shares and time-based restricted stock grants with three-year vesting schedules were the most appropriate form of equity compensation for the long-term incentive grant. The total award granted is split into two components: 60% performance shares and 40% time-based shares. Compensation Targets and Grants. The target long-term incentive compensation is set as a percentage of salary utilizing peer market data and input from the compensation consultant. The program provides the flexibility to vary the grant value +/- 25% of target value, based on the Committee’s assessment of a variety of factors, including Company performance, individual performance, retention considerations and affordability. The actual grants were near the target amounts for participating NEOs as shown in the table below. Due to their hire dates in early 2023, the Chief Financial Officer and Head of Commercial Banking did not participate in the LTI plan in 2023. The Chief Financial Officer received a three-year award of time-based shares totaling $200,000. The Head of Commercial Banking received a two-year award of time-based shares totaling $150,000. These awards have annual incremental vesting over the term of the award.
Long-term Incentive Plan (LTI)
| Title | 2023 Long-Term Incentive (Target Grant % of Salary) | 2023 Long-Term Incentive (Actual Grant % of Salary) | | President and CEO | 105% | 108% | | Chief Operating Officer | 85% | 88% | | Chief Financial Officer | NA | NA | | Head of Commercial Banking | NA | NA | | Chief Risk Officer | 45% | 45% |
Long-term Incentive Plan (LTI)
Note: The Former Interim CFO was not a participant in the executive incentive program. His incentive compensation target was based on his ongoing responsibilities as Chief Accounting Officer. He received a $50,002 grant on January 30, 2023 and a $61,272 grant on April 1, 2023. Both were time based grants with 50% annual incremental vesting over three years and 50% cliff vesting after three years.
LTI Vesting
LTI Vesting Once the grant value is determined, 60% is granted as performance shares and 40% is granted as time-based restricted stock. Time-based restricted stock vests 1/3 each year over three years. Performance shares cliff-vest at the end of the three-year performance period based on actual performance compared to predefined goals as described below.
Performance Share Metrics and Goals
Performance Share Metrics and Goals The performance shares are tied to financial metrics and goals approved by the Committee for a three-year performance period (i.e., 2023 - 2025). In 2023, the Committee maintained the same two performance goal categories compared to the previous year: absolute Operating Return on Tangible Common Equity ("Operating ROTCE") and relative Total Shareholder Return ("TSR"). Each performance metric was assigned a 50% weighting. The actual number of performance shares that vest is determined at the end of the three-year period depending on Company performance against the three-year goals. TSR performance is measured relative to a defined Industry Index comprised of all exchange-traded banks and thrifts between $7 billion and $25 billion in assets located in the United States. The first measure is average annual increase in Operating ROTCE, which is a non-GAAP measure and is reconciled to the GAAP measure in Appendix A. The goal is an average annual increase in the range of 75 -142 basis points compared to the base year. The Company will calculate the year-over-year increase in its Operating ROTCE in each of the three years. The average for these three years will be compared to the performance goal. The targeted average annual increase is 109 basis points. The second measure, relative TSR, measures our ability to deliver stock price appreciation and dividends relative to an index group over the three-year performance period. The target is the 50th percentile. The Company ranked in the 47th percentile of this group of 81 banks based on total assets when it was defined. In order to be counted in the final calculations, a company must remain a publicly traded institution at the end of the performance period ending at year-end 2025. The Committee did not significantly change the index criteria for the 2023 grant from the criteria used for the 2022 program. The table below shows the performance measures, as well as the threshold, target, and stretch performance goals established by the Committee. For the ROTCE measure, the threshold and stretch goals were each set at approximately a 30% difference from the target.
Performance Share Metrics and Goals
| | | Performance Goals | | | | Performance Measure | Weight | Threshold | Target | Stretch | | Average Annual Increase in Operating ROATCE | 50% | 75 basis points | 109 basis points | 142 basis points | | TSR | 50% | 25th percentile | 50th percentile | 75th percentile | | Payout (% of shares granted) | 100% | 50% | 100% | 150% |
2021 to 2023 Long-Term Incentive Plan Results
2021 to 2023 Long-Term Incentive Plan Results The terms of the 2021 LTI grant were discussed in the 2022 Proxy Statement and covered a three-year performance period, 2021 - 2023. The two equally weighted performance measures were relative improvement in Operating ROTCE and relative TSR. The Company’s relative performance based on these two measures was compared to the Industry Index. The Company's Operating ROTCE increased by 0.49% more than the Industry Index during the performance period. This result was near the target and demonstrated that the Company was improving profitability more strongly than the Index banks compared to the 2020 base period. The Company's relative TSR placed in the 82nd percentile during the performance period, which exceeded stretch goals. The total payout was 124.54% as shown in the table below.
2021 to 2023 Long-Term Incentive Plan Results
| | | Long Term Incentive Plan 2021 - 2023 Performance and Payout | | | | | | | Performance Measures | Weight | Threshold | Target | Stretch | Actual | % Funding | Pool Allocation | | Relative Change in Operating ROTCE | 50% | -0.20% | 0.50% | 1.20% | 0.49% | 99.07% | 49.54% | | TSR | 50% | 25th percentile | 50th percentile | 75th percentile | 82.6th percentile | 150.00% | 75.00% | | Payout (% of shares granted) | 100.0% | 50% | 100% | 150% | Total Payout | | 124.54% |
2021 to 2023 Long-Term Incentive Plan Results
The actual shares which were vested under the 2021 three year performance incentive were as follows:
2021 Performance Shares Vesting
2021 Performance Shares Vesting
2021 Performance Shares Vesting
| Participants | Grant Date | Share Grant | Cliff Vesting - 3-Year Results | | Mhatre | 1/30/2021 | 24,925 | 31,042 | | Gray | 1/30/2021 | 20,804 | 25,910 | | Lindenmuth | 1/30/2021 | 4,342 | 5,408 |
Potential Post Termination or Change in Control Benefits
Potential Post Termination or Change in Control Benefits An important consideration in our ability to attract and retain key personnel is our ability to minimize the impact on our management team of the possible disruption associated with our analysis of strategic opportunities and to be completely aligned with shareholder interests. Accordingly, we believe that it is in the best interest of the Company and its shareholders to provide our NEOs with reasonable financial arrangements in the event of termination of employment following a change in control or involuntary termination of employment for reasons other than cause following a change in control. The Company maintains an employment agreement with its Chief Executive Officer and change in control arrangements with the other NEOs. The employment agreement was intended to ensure that the CEO devotes his energy and attention to the long-term interest of the shareholders. The Company does not have any employment agreements with any other NEO or employee. Since 2009, the Company no longer enters into an employment or change in control agreement that provides for a tax indemnification payment in the event that the payment under the agreement results in additional tax liability under Section 280G of the Internal Revenue Code (a “Tax Indemnification Payment”). However, the Company maintains one legacy change in control agreement, with Mr. Gray, which was entered into in 2008, prior to the 2009 change, which provides for a potential Tax Indemnification Payment. For additional details, please see section titled “Potential Payments upon Termination of Employment or a Change-In-Control” of this proxy statement.
Risk Assessment and Related Considerations
Risk Assessment and Related Considerations The Chief Risk Officer conducts an annual risk review of the Company’s incentive compensation plans (the short-term and long-term incentive plans) as approved by the Committee for all eligible employees within the Company. This review for 2023 reported that the plans fit within established risk parameters and strategic plans. The Committee concluded that the incentive compensation plans do not motivate excessive risk-taking and are not reasonably likely to have a material adverse effect on the Company. The review determines if these plans encourage behaviors that expose the Company to unacceptable levels of risk. The review evaluates the balance of compensation elements between cash, performance shares, restricted stock grants, fixed versus variable compensation, and long-term versus short-term compensation. The plans consider the level of potential cash incentive compensation as compared to base salary, the focus of individual and corporate goals, as well as the weighting and balance of goals, and internal controls in place to mitigate possible excessive risk taking. Additionally, the plans include mechanisms for “deferral of payment” and/or “forfeiture of payment” relating to ethical business standards and clawback policies, as approved by the Committee, under which the Company may recover and/or revoke payments of incentive compensation attributable to certain trigger events, including employee misconduct and/or financial restatement. During 2023 the Committee continued to reinforce its risk-based approach to total compensation in various ways, such as incenting on operating profitability metrics and shareholder return, retaining a risk-based performance measure for Asset Quality and providing risk adjustment features that allows the Committee to reduce incentive awards in light of risk or regulatory concerns. The Committee remains committed to continuing to review and evolve compensation plans and ensure they represent sound and balanced risk management practices. The proper application of risk and governance, within the context of established strategic objectives, remain the driving factors in establishing the incentive compensation plans.
Role of the Compensation Committee, Management and Compensation Consultant
Role of the Compensation Committee, Management and Compensation Consultant Role of the Compensation Committee. At year-end 2023, the Committee consisted of six members, all of whom are independent. The Chairperson of the Committee regularly reports on material committee actions at Board meetings. The Committee ensures that the total compensation paid to the senior executives is fair, reasonable and performance-based while aligning with shareholder interests. The Committee is responsible for establishing, implementing and continually monitoring all elements of compensation for the NEOs. Elements of compensation are reviewed individually and in the aggregate, including base salary, annual cash incentives, long-term incentives/equity awards, total direct compensation, and benefits and perquisites. Additionally, the Committee biennially reviews its charter, philosophy and executive compensation practices, as well as industry compensation trends and best practices using market data and input from the compensation consultant. The Committee has the sole authority and resources to obtain advice and assistance from internal or external legal, human resource, accounting, compensation or other advisors or consultants as it deems desirable or appropriate. The Committee has direct access to, communicates, and meets regularly with the compensation consultant independently of management. The Committee’s major duties and responsibilities are as follows: •Review and benchmarking of overall compensation, benefit and perquisites •Review all compensation components for CEO and each NEO •Evaluate CEO and other NEOs’ individual performance •Ensure executive overall pay is aligned with corporate performance results •Review, evaluate and modify as needed, executive compensation plans •Ensure executives are not encouraged or rewarded for taking excessive risk •Approve annual cash incentive payments, annual equity grants, and vesting of performance shares for the CEO and other NEOs in accordance with the terms of the Executive Short-Term and Executive Long-Term Incentive Plans •Provide oversight to ensure compliance with all regulations related to executive compensation •Approve the annual Compensation Discussion and Analysis and make a Report to the Board •Participate with the Board in matters relating to management succession Role of Management. Although the Committee makes independent determinations on all matters related to compensation of the NEOs, certain members of management may be requested to attend or provide input to the Committee. Input may be sought from the CEO, Chief Operating Officer, Chief Human Resources and Culture Officer, Chief Financial Officer, Chief Risk Officer, Investor Relations Officer, or others to ensure the Committee has the information and perspective it needs to carry out its duties. In particular, the Committee seeks input from the CEO on matters relating to strategic objectives, Company performance goals and annual business plan. In addition, the CEO provides the Committee summaries of senior executive officer performance and recommendations relating to their compensation. The CEO is not present when the Committee discusses his performance and decides on his compensation. The Committee meets with the CEO to present its compensation decisions and discuss the evaluation of his performance. The Chief Human Resources and Culture Officer assists the Committee on matters of design, administration and operation of the Company’s compensation programs. The Chief Human Resources and Culture Officer may be requested, on the Committee’s behalf, to provide proposals or work with their independent compensation consultant to develop proposals for the Committee’s consideration. The Chief Human Resources and Culture Officer reports to the Committee directly on such matters. The Committee also receives updates from the Company’s Chief Risk Officer, Chief Financial Officer and Investor Relations Officer throughout the year as appropriate. Senior executives may provide insight, suggestions or recommendations regarding senior executive compensation. The Committee regularly meets in executive session without management present. Only Committee members vote on decisions regarding NEO compensation. Role of the Compensation Consultant. The Committee has the authority to retain a compensation consultant to advise on executive compensation matters, as well as access to outside legal counsel and other experts as needed. For 2023, the Committee renewed the engagement with Meridian Compensation Partners, LLC (“Meridian” or “the Consultant”) to serve as independent advisor to the Committee. During 2023, Meridian provided data, advice and counsel on executive compensation matters and responded to other ad hoc requests of the Committee. The Consultant reported directly to the Committee and carried out its responsibilities to the Committee in coordination with the Company’s Human Resources Department, as requested by the Committee. The Committee Chair has regular contact with the Consultant outside of meetings as appropriate. The Committee has reviewed Meridian’s services and determined that Meridian is independent with respect to SEC standards, as well as Company policy, and provides no other services to the company other than compensation consulting.
Other Compensation and Governance Policies and Practices
Shares that satisfy the stock ownership guidelines include Company stock owned outright and time-based restricted stock whether or not vested. Unexercised stock options and unvested performance shares do not count toward the guidelines. Newly hired senior executives, executives, directors and current employees of the Company are expected to satisfy the stock ownership guidelines within five years of the date such individual first became subject to the guidelines, unless the Committee determines otherwise. The guidelines include a retention policy which requires a minimum of 50% of shares (net of taxes) to be held upon each vesting until the ownership guidelines are met. Should covered individuals no longer meet the stock ownership guidelines, they will have 18 months to acquire additional Company stock in order to satisfy the ownership guidelines. The Committee reserves the right to make exceptions as appropriate. Clawback Policies. Our Board of Directors has adopted a clawback policy that complies with the New York Stock Exchange listing standards as mandated by the SEC. The policy requires the clawback of incentive-based compensation erroneously received by current or former executive officers after an accounting restatement (calculated based on an error that was subsequently corrected in the accounting restatement), regardless of any misconduct or knowledge of the officer who received the compensation. This policy is intended to supplement any other clawback provisions implemented by the Company in effect now, or in the future. In addition to the SEC compliant clawback policy, equity awards granted under the Company’s 2022 Equity Incentive Plan are subject to clawback if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws, and the automatic forfeiture provisions under Section 304 of the Sarbanes-Oxley Act of 2002 apply as a result. The equity awards granted under the Company’s 2022 Equity Incentive Plan are also subject to cancellation upon a termination of employment for cause. Impact of Taxation on the Form of Compensation. The Committee considers a variety of factors, including the Company’s tax position, the materiality of the payments and tax deductions involved, the objectives of the executive compensation programs and the Company’s compensation philosophy in structuring compensation programs and making compensation decisions. In general, Section 162(m) of the Code generally limits to $1.0 million the deduction that a company is permitted to take for annual compensation paid to each “covered employee.” A “covered employee” includes any person who served as CEO or CFO of a company at any time during a fiscal year and the three other most highly compensated executive officers for that fiscal year and any other person who was a covered employee in a previous taxable year after December 31, 2016. Due to the continued importance and benefit to the Company and our shareholders of awarding compensation that is structured to properly incentivize our executive officers, the Committee believes that it is in our best interests to retain flexibility in awarding compensation, even if some awards may be non-deductible compensation expenses to the Company.
Summary Compensation Table
Summary Compensation Table The following table provides the total compensation earned by or paid to the Named Executive Officers for the fiscal years ended December 31, 2023, 2022, and 2021, respectively.
Summary Compensation Table
| Name and Principal Position(1) | Year | Salary ($) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) ($) | All Other Compensation(4) ($) | Total ($) | | Nitin J. Mhatre, President, Chief Executive Officer | 2023 | 835,000 | — | 905,934 | — | 584,542 | — | 307,905 | 2,633,381 | | | 2022 | 775,000 | — | 813,751 | — | 871,875 | — | 148,974 | 2,609,600 | | | 2021 | 644,135 | — | 688,766 | — | 815,625 | — | 144,326 | 2,292,852 | | R. David Rosato, Senior Executive Vice President, Chief Financial Officer | 2023 | 432,692 | — | 200,000 | — | 256,685 | — | 94,503 | 983,880 | | Sean A. Gray, Senior Executive Vice President, Chief Operating Officer | 2023 | 584,000 | — | 516,664 | — | 327,063 | — | 167,736 | 1,595,463 | | | 2022 | 566,500 | — | 577,851 | — | 509,850 | — | 166,652 | 1,820,853 | | | 2021 | 550,000 | — | 574,895 | — | 495,000 | — | 193,561 | 1,813,456 | | James C. Brown, Senior Executive Vice President, Head of Commercial | 2023 | 430,231 | — | 150,000 | — | 241,284 | — | 20,154 | 841,669 | | Gregory D. Lindenmuth, Senior Executive Vice President, Chief Risk Officer | 2023 | 355,350 | — | 160,000 | — | 149,258 | — | 16,351 | 680,959 | | | 2022 | 345,000 | — | 165,625 | — | 155,250 | — | 15,534 | 681,409 | | | 2021 | 300,000 | — | 120,006 | — | 135,000 | — | 14,648 | 569,654 | | Brett Brbovic, Senior Managing Director, Former Interim Chief Financial Officer | 2023 | 253,575 | | 111,274 | — | 59,172 | | 12,163 | 436,184 | | | 2022 | 245,000 | — | 32,019 | — | 75,000 | — | 6,851 | 358,870 |
Summary Compensation Table
(1)Messrs. Rosato and Brown were Named Executive Officers for the first time in 2023. Mr. Brbovic was a Named Executive Officer for the first time in 2022. Pursuant to SEC rules, compensation for prior years is not required to be reported for these individuals. (2)The amounts reported are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718 and represent an award under the Company’s performance-based, long-term incentive compensation program. Awards consist of restricted stock, a portion of which vests ratably over three years and a portion that vests based on the achievement of certain performance criteria. Since all awards vest after the year in which they are granted, none of the Named Executive Officers recognized any income from the awards in the year they were made. Amounts shown are the aggregate grant date fair value of restricted stock awards. For those restricted stock awards that are subject to performance conditions, the grant date fair values are based on the outcome of such conditions at target level. Total shares and values for stock awards reported in this table may not match other tables due to rounding. See Note 18 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2023. Based on the fair value at grant date, the following are the maximum potential values of the performance shares for the 2023-2025 performance period assuming maximum level of performance is achieved: Mr. Mhatre, $832,752; Mr. Gray, $474,929; and Mr. Lindenmuth, $143,315. Messrs. Rosato, Brown, and Brbovic were not granted performance shares in 2023. For each year shown in the above table, the amounts in the Stock Awards column are determined by multiplying the number of restricted stock awards granted on a particular date by the fair value at that date, and a breakdown for each individual is as follows:
Summary Compensation Table
| Number of Restricted Stock Awards Granted | | | | | | | | | Grant Date | Grant Date Closing Price | Nitin J. Mhatre | Sean A. Gray | R. David Rosato | James C. Brown | Gregory D. Lindenmuth | Brett Brbovic | | April 1, 2023 | $25.06 | — | — | 7,981 | — | — | 2,445 | | January 30, 2023 | $30.36 | 28,879 | 16,470 | — | 4,941 | 5,271 | 1,647 | | April 1, 2022 | $28.82 | — | — | — | — | — | 1,111 | | January 30, 2022 | $28.92 | 28,138 | 19,981 | — | — | 5,727 | — | | January 30, 2021 | $16.58 | 41,542 | 34,674 | — | — | 7,238 | — |
Summary Compensation Table
(3) The Supplemental Executive Retirement Agreements do not provide for above-market earnings and therefore amounts are not included in this column. (4) Details of the amounts reported in the “All Other Compensation” column for 2023 are provided in the following table:
Summary Compensation Table
| Name | 401(k) Employer Contribution ($) | Dividends on Restricted Stock ($) | Automobile ($) | Financial Planning ($) | Membership Fees ($) | Long-Term Care Premiums and Imputed Income on Life Insurance* ($) | Long-Term Disability ($) | Other ** ($) | Total ($) | | Nitin J. Mhatre | — | 7,782 | 18,000 | — | — | — | 4,131 | 277,992 | 307,905 | | R. David Rosato | 8,846 | — | 12,981 | 1,500 | — | — | 405 | 70,771 | 94,503 | | Sean A. Gray | 13,107 | 10,282 | 15,000 | — | — | 26,902 | 2,445 | 100,000 | 167,736 | | James C. Brown | — | — | 13,731 | 6,000 | — | — | 423 | — | 20,154 | | Gregory D. Lindenmuth | 13,200 | 2,709 | — | — | — | — | 442 | — | 16,351 | | Brett Brbovic | 10,038 | 2,125 | — | — | — | — | — | — | 12,163 |
Summary Compensation Table
* Amount shown reflects long-term care premiums in the amount of $26,429 and split dollar life imputed income in the amount of $446. ** The Company credited Mr. Mhatre and Mr. Gray’s Supplemental Executive Retirement Agreement account balances with $125,000 and $100,000, respectively, pursuant to the terms of the agreements. In addition, the amounts shown for Messrs. Mhatre and Rosato include a housing relocation reimbursement, which was increased to cover income taxes, in the amount of $152,993 and $70,771, respectively.
Grants of Plan-Based Awards
Grants of Plan-Based Awards The following table provides information concerning the award opportunities granted to the Company’s NEOs in 2023, and the amounts, if any, that may be paid in future years.
Grants of Plan-Based Awards
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | Grant Date Fair Value of Stock and Option Awards(3) ($) | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Nitin J. Mhatre | 1/30/2023 | — | 626,250 | — | — | — | — | — | — | | | 1/30/2023 | — | — | — | — | — | — | 11,552 | 350,719 | | | 1/30/2023 | — | — | — | 8,664 | 17,327 | 25,991 | — | 555,157 | | R. David Rosato | 1/30/2023 | — | 275,000 | — | — | — | — | — | — | | | 4/1/2023 | — | — | — | — | — | — | 7,981 | 200,004 | | | 1/30/2023 | — | — | — | — | — | — | — | — | | Sean A. Gray | 1/30/2023 | — | 350,400 | — | — | — | — | — | — | | | 1/30/2023 | — | — | — | — | — | — | 6,588 | 200,011 | | | 1/30/2023 | — | — | — | 4,941 | 9,882 | 14,823 | — | 316,619 | | James C. Brown | 1/30/2023 | — | 258,500 | — | — | — | — | — | — | | | 1/30/2023 | — | — | — | — | — | — | 4,941 | 150,009 | | | 1/30/2023 | — | — | — | — | — | — | — | — | | Gregory D. Lindenmuth | 1/30/2023 | — | 159,908 | — | — | — | — | — | — | | | 1/30/2023 | — | — | — | — | — | — | 2,109 | 64,029 | | | 1/30/2023 | — | — | — | 1,581 | 3,162 | 4,473 | — | 101,310 | | Brett Brbovic | 1/30/2023 | — | 63,394 | — | — | — | — | 1,647 | 50,002 | | | 4/1/2023 | — | — | — | — | — | — | 2,445 | 61,272 |
Grants of Plan-Based Awards
(1)Amount represents awards granted for future payment to the Named Executive Officers under the Short-Term Incentive Plan (STI). Please see the section titled “Compensation Discussion and Analysis – Short-Term Incentive Compensation” for a discussion of the STI. (2)Amount shown reflects the number of restricted stock awards, subject to performance-based vesting, that may be earned under the Long-Term Incentive Plan (LTI). Performance below threshold may result in no award payable to the Named Executive Officer. Please see the section titled “Compensation Discussion and Analysis – Long-term Incentive Plan” for a discussion of the LTI. (3)The amounts reported are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718.
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table provides information concerning unvested stock awards for each Named Executive Officer as of December 31, 2023. The NEOs do not hold any stock options.
Outstanding Equity Awards at December 31, 2023
| | | Option Awards | | Stock Awards | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($)(11) | | Nitin J. Mhatre | 1/30/2021 | — | — | 5,539(1) | 137,533 | 24,925(7) | 618,888 | | | 1/30/2022 | — | — | 7,504(2) | 186,324 | 16,882(8) | 419,180 | | | 1/30/2023 | — | — | 11,552(3) | 286,836 | 17,327(9) | 430,229 | | R. David Rosato | 4/1/2023 | — | — | 7,981(4) | 198,428 | — | — | | Sean A. Gray | 1/30/2021 | — | — | 4,624(1) | 114,814 | 20,804(7) | 516,563 | | | 1/30/2022 | — | — | 5,329(2) | 132,319 | 11,988(8) | 297,662 | | | 1/30/2023 | — | — | 6588(3) | 163,580 | 9,882(9) | 245,370 | | James C. Brown | 1/30/2023 | — | — | 4,941(5) | 122,685 | — | — | | Gregory D. Lindenmuth | 1/30/2021 | — | — | 996(1) | 24,731 | 4,342(7) | 107,812 | | | 1/30/2022 | — | — | 1,528(2) | 37,940 | 3,436(8) | 85,316 | | | 1/30/2023 | — | — | 2,109(3) | 52,366 | 3,162(9) | 78,512 | | Brett R. Brbovic | 4/1/2021 | — | — | 953(10) | 23,663 | — | — | | | 7/1/2021 | — | — | 1,439(10) | 35.703 | — | — | | | 4/1/2022 | — | — | 926(10) | 22,993 | — | — | | | 1/30/2023 | — | — | 1,647(6) | 40,895 | — | — | | | 4/1/2023 | — | — | 2,445(6) | 60,709 | — | — |
Outstanding Equity Awards at December 31, 2023
(1)Remaining shares granted on January 30, 2021 will vest ratably on each January 30th through 2024. (2)Remaining shares granted on January 30, 2022 will vest ratably on each January 30th through 2025. (3)Remaining shares granted on January 30, 2023 will vest ratably on each January 30th through 2026. (4)Remaining shares granted on April 1, 2023 will vest ratably on each April 1st through 2026. (5)Remaining shares granted on January 30, 2023 will vest ratably on each January 30th through 2025. (6)Fifty percent (50%) of the shares granted on January 30, 2023 and April 1, 2023 will vest ratably over three years and the other 50% are subject to a three year cliff vesting schedule. (7)These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined and vest on the first compensation committee meeting following January 30, 2024 based on the 2021-2023 performance period. (8)These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined and vest on the first compensation committee meeting following January 30, 2025 based on the 2022-2024 performance period. (9)These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined and vest on the first compensation committee meeting following January 30, 2026 based on the 2023-2025 performance period. (10)Remaining shares granted on April 1, 2021 will vest on April 1, 2024; remaining shares granted on July 1, 2021 will vest on July 1, 2024; and remaining shares granted on April 1, 2022 will vest 50% ratably on each April 1st through 2025 and 50% will cliff vest on April 1, 2025. (11)Computed using the fair market value of the awards.
Option Exercises and Stock Vesting
Option Exercises and Stock Vesting The following table provides information concerning the vesting of restricted stock awards for each Named Executive Officer, on an aggregate basis, during 2023. The NEOs do not hold any stock options.
Option Exercises and Stock Vesting
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (1) ($) | | Nitin J. Mhatre | — | — | 9,291 | 282,075 | | R. David Rosato | — | — | — | — | | Sean A. Gray | — | — | 9,579 | 290,818 | | James C. Brown | — | — | — | — | | Gregory D. Lindenmuth | — | — | 2,461 | 74,718 | | Brett Brbovic | — | — | 1,470 | 32,305 |
Option Exercises and Stock Vesting
(1)Represents the aggregate value realized in 2023 upon the vesting of restricted stock awards granted in prior years under the Company’s long-term incentive plan and based on the value of the Company’s stock on the applicable vesting dates for each award. The value realized by the NEO upon vesting is also the amount reported as 2023 taxable income.
Non-qualified Deferred Compensation
Non-qualified Deferred Compensation The following table provides information for the nonqualified deferred compensation plans in which Messrs. Mhatre and Gray participated in 2023. No other named executive officer participated in a nonqualified deferred compensation plan.
Non-qualified Deferred Compensation
| Name | Plan Name | Registrant Contributions in Last Fiscal Year ($)(1) | Aggregate Earnings in 2023 ($) | Aggregate Balance at Last Fiscal Year End ($)(2) | | Nitin J. Mhatre | Supplemental Executive Retirement Agreement | 125,000 | — | 375,000 | | Sean A. Gray | Supplemental Executive Retirement Agreement | 100,000 | — | 500,000 |
Non-qualified Deferred Compensation
(1)Contributions included in the “Registrant Contributions in Last Fiscal Year” column are included as compensation for the Named Executive Officer in the Summary Compensation Table. (2)Amounts included in the “Aggregate Balance at Last Fiscal Year End” have been reported as compensation for the Named Executive Officer in the Summary Compensation Table.
Potential Payments Upon Termination or Change-in-Control
Potential Payments Upon Termination or Change-in-Control The following table summarizes the estimated payments that would be made to the NEOs upon termination of employment as of December 31, 2023, pursuant to each executive’s employment agreement, change in control arrangement, equity awards, benefit plans and other arrangements. The amounts shown do not include the executive’s vested account balance in the Bank’s 401(k) Plan, non-qualified deferred compensation plans and the value of continued long-term care insurance, if applicable. The amounts shown relating to unvested restricted stock awards are based on the fair market value of the Company’s common stock on December 29, 2023, which was $24.83. The actual amounts to be paid to an executive can only be determined at the time of such executive’s separation from service with the Company. The following table provides the estimated amount of compensation payable to Mr. Mhatre for each of the termination events listed below.
Potential Payments Upon Termination or Change-in-Control
| | Termination for Cause ($)(1) | Termination Without Cause or for Good Reason ($)(2) | Payments Due Upon Change in Control With Termination of Employment ($)(3) | Disability($)(4) | Death($)(5) | | Cash severance | — | 4,689,626 | 4,689,626 | — | — | | In-kind benefits | — | 73,548 | 76,129 | 49,032 | — | | Restricted stock vesting(7) | — | — | 2,078,991 | 2,078,991 | 2,078,991 | | SERP | — | 150,000 | 1,850,000 | — | — |
Potential Payments Upon Termination or Change-in-Control
The following table provides the estimated amount of compensation payable to Messrs. Rosato, Gray, Brown, Lindenmuth, and Mr. Brbovic upon their termination of employment in connection with a change in control. The change in control agreements entered into with the executives do not provide for any severance payments or benefits in the event of a termination of employment that is not in connection with or subsequent to a change in control.1)for Cause ($)(1)
Potential Payments Upon Termination or Change-in-Control
| | R. David Rosato(6) ($) | Sean A. Gray(6)(9) ($) | James Brown(6) ($) | Gregory D. Lindenmuth(6) ($) | Brett Brbovic(6) ($) | | Cash severance | 2,325,000 | 3,449,373 | 2,185,501 | 1,545,773 | 320,661 | | In-kind benefits | — | 48,693 | — | 30,613 | 25,312 | | Restricted stock vesting(7) | 198,168 | 1,470,308 | 122,685 | 428,193 | 101,604 | | SERP(8) | — | 600,000 | — | — | — |
Potential Payments Upon Termination or Change-in-Control
(1)Upon a termination for “cause” (as defined in the applicable agreements), the executive will have no right to receive compensation or other benefits under the employment agreement and SERP. In addition, he will forfeit all non-vested restricted stock awards. (2)Under the executive’s employment agreement, upon an involuntary termination for a reason other than for cause or if the executive voluntarily resigns for “good reason” (as defined in the employment agreement), the executive (or, upon death, his beneficiary) would be entitled to receive a severance payment in the form of a cash lump sum payment equal to the base salary for the remaining unexpired term of the employment agreement plus annual cash bonuses for each year (prorated in the event of a partial year) remaining under the unexpired term of the employment agreement. In addition, he and his dependents would become entitled, at no cost to the executive, to the continuation of non-taxable medical and dental coverage for the remaining unexpired term of the employment agreement. Upon termination of the executive’s employment under these circumstances, the executive must adhere to a one-year non-competition and non-solicitation restriction. The amount shown in this column assumes the remaining term of the contract is three years. Under the executive’s supplemental executive retirement agreement, if Mr. Mhatre separates from service for a reason other than cause, he will receive his vested benefit at the time of separation from service in a lump sum. If Mr. Mhatre is a “specified employee” (as defined in Section 409A of the Code), the amounts payable under the employment agreement and supplemental executive retirement agreement will be paid six months after his separation from service. (3)Under the executive’s employment agreement, upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreements) in connection with or following a change in control of the Company or the Bank, the executive would be entitled to a cash severance payment equal to three times base salary and cash incentive, plus the annual cash incentive pro-rated through the date of termination, and life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained for the executive prior to termination of employment for 36 months at no cost to the executive. Under the supplemental executive retirement agreement, in the event of Mr. Mhatre separates from service for a reason other than for cause prior to normal retirement age (age 65) and in connection with or within two years following a change in control (as defined in the agreement), Mr. Mhatre’s account balance will become fully vested and the amount of the account balance shall be increased to equal the amount that the Bank would have otherwise credited Mr. Mhatre’s account through the calendar year in which Mr. Mhatre would have attained normal retirement age and the amount shown reflects the non-vested portion that would become vested upon a qualifying termination of employment following a change in control. If Mr. Mhatre is a “specified employee” (as defined in Section 409A of the Code), the amounts payable under the employment agreement and supplemental executive retirement agreement will be paid six months after his separation from service. (4)Under the executive’s employment agreement, upon a termination due to “disability” (as defined in the employment agreement), the executive would be entitled to continued non-taxable medical and dental insurance, at no cost to the executive, until the earlier of the second anniversary of the date of termination or age sixty-five (65). This column shows the value of two years of continued insurance. Additionally, the executive would be entitled to receive benefits under the provisions of disability insurance coverage in effect for Berkshire Bank employees and executives. Upon termination due to disability, restricted stock awards granted pursuant to our equity incentive plans automatically vest. The executive does not hold any stock options. (5)Under the executive’s employment agreement, upon death, the executive’s beneficiary will receive any earned but unpaid compensation and vested benefits due the executive as of the date of death. In addition, the executive’s estate or beneficiary would be entitled to receive benefits under the provisions of any life insurance coverage in effect for Berkshire Bank employees and executives. Upon termination due to death, restricted stock awards granted pursuant to our equity incentive plans automatically vest. The executive does not hold any stock options. (6)Mr. Gray’s change in control agreement provides that upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreements) following a change in control of the Company or the Bank, the executive would be entitled to a cash severance payment equal to three times his average annual compensation for the five years preceding the change in control, and life insurance and non-taxable medical, dental and disability coverage substantially identical to the coverage maintained for the executive prior to his termination of employment for 36 months following the executive’s termination of employment. The executive would also be entitled to receive a tax indemnification payment if payments under the change in control agreement trigger liability under Section 280G of the Code for the excise tax applicable to “excess parachute payments.” The estimated amount of the tax indemnification payment is $2,685,496 and this amount is not reflected in the above table. Beginning in 2009, the Company determined that it would no longer enter into change in control agreements that provide for a tax gross-up for any taxes as a result of “excess parachute payments” under Section 280G of the Code and Mr. Gray’s change in control agreement was entered into before the Company adopted this position. The change in control arrangements entered into with Messrs. Brbovic, Brown, Lindenmuth, and Rosato provide that upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreements) in connection with or following a change in control of the Company or the Bank, the executive would be entitled to a cash severance payment equal to three times (one times for Mr. Brbovic) base salary and cash incentive, plus the annual cash incentive pro-rated through the date of termination, and life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained for the executive prior to termination of employment for 36 months following termination of employment, with the executive paying his share of the premiums. For Messrs. Brbovic, Brown, Lindenmuth, and Rosato, severance payments will be reduced to avoid liability under Section 280G of the Code for the excise tax applicable to “excess parachute payments” and it is estimated that Messrs. Brown, Lindenmuth, and Rosato's payments will be reduced by $811,315, $534,492, and $727,400, respectively, which is not shown in the above table, and Mr. Brbovic’s payments would not be reduced under this provision. None of the change in control arrangements entitle the executives to any tax indemnification payment (a “tax gross-up”) if payments trigger liability under Sections 280G and 4999 of the Internal Revenue Code for an excise tax on “excess parachute payments.” (7)In the event of a change in control of the Company or the Bank, equity awards subject to time-based vesting automatically vest only if an executive experiences a qualifying termination of employment following a change in control (a “double trigger”). The amount shown reflects the value of such awards as well as equity awards subject to performance-based vesting.
Potential Payments Upon Termination or Change-in-Control
(8)The supplemental executive retirement agreement entered into with Mr. Gray provides that upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreement) in connection with or following a change in control of the Company or the Bank, death or disability, the executive would become entitled to a payment in the amount of $1 million. The executive’s benefit is subject to a five-year vesting schedule, with twenty percent (20%) of the account vesting each year, commencing on January 1, 2020. The amount shown reflects the non-vested portion that would become vested upon a qualifying termination of employment following a change in control. (9)To supplement the Bank’s disability programs, the Bank implemented a long-term care plan (“LTC Plan”) in 2015. Mr. Gray participates in the LTC Plan. Mr. Gray will become vested upon the earliest of (i) the executive attaining age 62 with ten years of service; (ii) the executive attaining age 55 with 20 years of service; (iii) a change in control; (iv) or disability. Once vested, an individual and his spouse are generally eligible for long-term care benefits during their lifetime, at no cost to the covered individual, and with the Bank paying the cost of such coverage. The above table does not reflect the value of such continued coverage.
CEO Pay Ratio
CEO Pay Ratio Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information about the relationship of the annual total compensation of our median compensated employee and the annual total compensation of Nitin J. Mhatre, our CEO as of December 31, 2023. The 2023 annual total compensation of our median employee, other than Mr. Mhatre, was $59,792 and the 2023 annual total compensation of Mr. Mhatre, as reported in the Summary Compensation Table, was $2,633,381. Based on this information, for 2023, we estimate the ratio of the annual total compensation of Mr. Mhatre to the annual total compensation of our median employee was 44 to 1. As of December 31, 2022, the date we selected to identify our median employee, we identified our median employee based on compensation paid during 2022 to all our employees, other than Mr. Mhatre, who were employed by us on December 31, 2022. We have elected to use the same median employee that we identified in 2022 for the determination of 2023 pay ratio since there has not been a change to our employee population or compensation arrangements that would significantly impact this pay ratio disclosure. Further, we determined the annual total compensation of our median employee based on total cash compensation, which included base pay, commissions and bonuses, and we included all employees, whether employed on a full-time, part-time or seasonal basis, and no full-time equivalent adjustments were made for part-time employees. We then identified and calculated the elements of this employee’s total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K. The SEC’s rules regarding the identification of the median compensated employee and the process of the calculating the pay ratio, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Pay Versus Performance Table
Pay Versus Performance Table As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (as defined by SEC rules) and certain financial performance of the Company. The Compensation Committee did not consider the pay versus performance disclosure when making its incentive compensation decisions. For further information about how we align executive compensation with the Company’s performance, see the “Compensation Discussion and Analysis” above. The amounts in the table below are calculated in accordance with SEC rules and do not represent amounts actually earned or realized by Principal Executive Officers (“PEOs”) and non-PEO NEOs, including with respect to restricted stock compensation.
Pay Versus Performance Table
| | PEO | | | | | | | | | | | | | | Summary Compensation Table Total(1) | | | Compensation Actually Paid(2) | | | Average Summary Compensation Table Total for Non-PEO NEOs(3) ($) | Average Compensation Actually Paid to Non-PEO NEOs(4) ($) | Value of Initial Fixed $100 Fixed Investment from 12/31/19 | | | Company-Selected Performance Measure | | Year | PEO 1 Nitin Mhatre ($) | PEO 2 Sean Gray ($) | PEO 3 Richard Marotta ($) | PEO 1 Nitin Mhatre ($) | PEO 2 Sean Gray ($) | PEO 3 Richard Marotta ($) | | | Total Shareholder Return ($)(5) | Peer Group Total Shareholder Return ($)(6) | Net Income ($M) | Operating ROTCE(7) | | 2023 | 2,633,381 | N/A | N/A | 1,658,299 | N/A | N/A | 907,631 | 635,368 | 85.10 | 115.64 | 69,598 | 8.03% | | 2022 | 2,609,600 | N/A | N/A | 2,984,797 | N/A | N/A | 957,688 | 987,755 | 99.13 | 116.10 | 92,533 | 8.94% | | 2021 | 2,292,852 | 1,813,456 | N/A | 2,947,138 | 2,662,478 | N/A | 616,334 | 643,915 | 92.51 | 124.74 | 118,664 | 7.74% | | 2020 | N/A | 1,493,453 | 5,301,126 | N/A | 804,428 | 3,646,629 | 621,554 | 350,331 | 54.70 | 91.29 | (533,017) | 3.18% |
Pay Versus Performance Table
(1) The dollar amounts reported for the PEOs Mr. Mhatre, Mr. Gray and Mr. Marotta under “Summary Compensation Table Total” are the amounts of total compensation reported for those persons for each corresponding year in the “Total” column of the Summary Compensation Table. (2) The dollar amounts reported for Mr. Mhatre, Mr. Gray, and Mr. Marotta under “Compensation Actually Paid” represent the amount of “compensation actually paid” to those persons, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to them during the applicable year. (3) The dollar amounts reported under Average Summary Compensation Total for non-PEO NEOs represent the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding any individual serving as our CEO during such year) in the “Total” column of the Summary Compensation Table in each applicable year. The NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023, Sean Gray, David Rosato, James Brown, Gregory Lindenmuth, and Brett Brbovic); (ii) for 2022, Sean Gray, Brett Brbovic, George Bacigalupo, Gregory Lindenmuth, and Subhadeep Basu; (iii) for 2021, Subhadeep Basu, George Bacigalupo, Gregory Lindenmuth, Deborah Stephenson and James Moses; and (iv) for 2020, James Moses, George Bacigalupo, Gregory Lindenmuth, and Tami Gunsch. (4) The dollar amounts reported under Average Compensation Actually Paid for non-PEO NEOs represent the average amount of “compensation actually paid” to the NEOs as a group (excluding the CEO), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group during the applicable year. (5) Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period which is December 31, 2019. (6) Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: KBW NASDAQ Regional Banking Index. The measurement period is from December 31, 2019. (7) Operating Return on Tangible Common Equity is based on earnings on an operating basis as adjusted for notable items as disclosed in Appendix A. The specific measure used is the Operating Return on Tangible Common Equity, excluding unrealized losses on AFS securities. In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to the PEO's and non-PEO NEOs’ total compensation to determine the compensation actually paid in 2023:
Pay Versus Performance Table
| | PEO | Average Non-PEO NEOs | | | 2023 | 2023 | | Total Compensation as reported in Summary Compensation Table (SCT) | $2,633,381 | $907,631 | | Pension values reported in SCT | — | — | | Fair value of equity awards granted during fiscal year | (905,934) | (227,588) | | Pension value attributable to current year’s service and any change in pension value attributable to plan amendments made in the current year | — | — | | Fair value of equity compensation granted and vested in current year—value at vesting date | — | — | | Fair value of equity compensation granted and outstanding in current year—value at year-end | 677,929 | 186,561 | | Change in fair value for end of prior fiscal year to vesting date for awards made in prior fiscal years that vested during current fiscal year | 4,274 | (2,660) | | Change in fair value from end of prior fiscal year to end of current fiscal year for awards made in prior fiscal years that were unvested at end of current fiscal year | (751,351) | (147,170) | | Dividends or other earnings paid on stock or options awards in the covered fiscal year prior to the vesting date that are not otherwise included in the total compensation for the covered fiscal year | — | — | | Fair value of awards forfeited in current fiscal year determined at end of prior fiscal year | — | (81,406) | | Compensation Actually Paid to NEOs | $1,658,299 | $635,368 |
Analysis of the Information Presented in the Pay versus Performance Table
Analysis of the Information Presented in the Pay versus Performance Table While we utilize several performance measures to align executive compensation with performance, all of those measures are not presented in the Pay versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually paid (as defined by SEC rules) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following graphic descriptions of the relationships between information presented in the Pay versus Performance table.
Compensation Actually Paid and TSR
Compensation Actually Paid and TSR
Compensation Actually Paid and Net Income
Compensation Actually Paid and Net Income
Compensation Actually Paid and Operating ROTCE
Compensation Actually Paid and Operating ROTCE
Compensation Actually Paid and Operating ROTCE
| Proposal 3: Ratification of the Appointment of the Independent Registered Public Accounting Firm | |
Compensation Actually Paid and Operating ROTCE
The Board of Directors recommends ratification of the Audit Committee’s appointment of Crowe LLP as our independent registered public accounting firm for fiscal year 2024. Background. The Company’s independent registered public accounting firm (“Accounting Firm”) for the year ended December 31, 2023 was Crowe LLP (“Crowe”). The Audit Committee has appointed Crowe as the independent registered public accounting firm for the year ending December 31, 2024, subject to ratification by the shareholders at the Annual Meeting. A representative of Crowe is expected to be present at the Annual Meeting to respond to appropriate questions from shareholders and will have the opportunity to make a statement should they desire to do so. Shareholder ratification of the appointment of Crowe is not required by the Company’s bylaws or otherwise. However, the Board of Directors is submitting the appointment of the Accounting Firm to the shareholders for ratification as a matter of good corporate practice. If the ratification of the appointment of the firm is not approved by a majority of the votes cast by shareholders at the Annual Meeting, other independent registered public accounting firms may be considered by the Audit Committee of the Board of Directors. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF CROWE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2024 FISCAL YEAR.
Other Information Relating to Directors and Executive Officers
Other Information Relating to Directors and Executive Officers